Friday, December 6, 2013

A bit busy at work, so I haven't checked up on anything, aside from seeing that the "good jobs report" made the market go up (i.e. the economy looks good) instead of down (i.e. OMG the Fed's going to taper!).

I gotta wonder if the short-term market had already positioned itself short in anticipation of a good report; then when the good news hit, they saw that nobody was selling, cos anyone who would have sold had already sold short. So they had to buy back, and now the market resumes its upward trend.

It's possible, I guess. Anyway, I won't short an up market, so I'm happily holding my stuff.

FT Alphaville - Spain's IBEX is the world's most overpriced benchmark. Andrew Wilkinson at Miller Tabak says that because IBEX's current PE is at 106% of +2SD of its 5-year average PE. Did you follow that? Shanghai, by contrast, is at 44%. Did you follow that? This means Andrew Wilkinson has told us that he doesn't realize the Spanish market has laid in utter collapse for 5 years, while China was grossly overvalued for much of that same time. Nor does he think the IBEX has a reason to go up in the next year.

Sorry, Andrew! You should figure out what the hell the numbers actually mean before you write about them.

FT beyond brics - be careful with Indian exit polls. Avantika Chilkoti points out that Indian polls are pretty useless for determining election results, so tread carefully. But here's the interesting bit:

In fact, whatever the rumours and whatever the predictions, markets tend to rally in the run up to elections in India.

Analysts at BofA ML say that if an investor bought the benchmark Sensex index six months before polling day and sold the day before, they would have made a gain in six of the last seven elections with an average return of 15 per cent. The sectors that have done well in the past are autos, energy and utilities while consumer staples have suffered.

I wonder if we should see the same effect on gold?

Mineweb - boo! hedging! scared ya! Uh oh. William Tankard at GFMS suggests gold hedging is the way forward for producers. Well, unfortunately hedging is a downward pressure on prices, so it's a positive feedback for gold price downside.

Kipper the Keenmeister and his buddy The Clive™ have finally lobbed the grenade that might perhaps start a discussion on how to resuscitate the smoking ruin that once was junior mining. Here's two articles that suggest perhaps we might get the ball rolling:

It may not come as a surprise, but Johnson had some fiery opinions to make, laying into management teams he sees as recalcitrant when it comes to deal making. Not signing confidentialiy agreements. Or if they did, not handing over data after B2Gold had promised a two-year standstill.

"There's a couple groups in the industry that aren't, in my mind, doing what they should be as public companies," Johnson said. He continued on to say, "A lot of institutions are asking me who won't sign what."

He didn't elaborate on the answer.

It's led B2Gold, Johnson said, to alter their confidentiality agreements. B2Gold still agrees to a standstill, he said, but if after 90 days a company isn't forthcoming with promised data on assets then the provision falls.

And here they are talking about the joke of NI 43-101:

Conway: I can tell you 43-101 is a piece of garbage. It's not worth anything.

Johnson: It's a joke.

Conway: It's a joke. It's not protecting you guys in any way, shape or form.

Johnson: Absolutely.

Johnson: What we typically see where it falls apart is the block model. We just say, give us your data...it usually fails right there. The extrapolation that they're using for their reserves and resources is probably completely out of whack relative to the geostatistical information or data that is there.

I think the part the OSC/BCSC/SEC need to take away from this is the "it's not protecting you guys in any way". That's what the regulators should pay attention to, since the point of NI 43-101 was to protect investors from scams, since after all it was instituted on the back of the Bre-X disaster, which itself destroyed the capital markets for a couple years.

And finally, with the entire junior mining industry lying in a smoking ruin as capital continues to flee the entire industry, sending the $HUI to its 2008 low and beyond, a lesson learned that cannot be unlearned and will take portfolios decades to recover from, and capital remembering the old adage "fool me twice", finally people are starting to speak up about what went so disastrously wrong:

Mineweb - truth-telling in resource estimates. A P.Geo. writes in with his/her comments. Kipper also wants more P.Geos to write in, cos I guess he realizes what a good story this is.

But check out this quote from the P.Geo.:

We need some mechanism to encourage consultants to aspire to deliver the
“truth” (i.e. an orebody in which reserves match eventual production) rather
than an estimate that pleases their client – whoever it is. Once that problem is
dealt with, the technical flaws I discuss below will likely become a lot less
common.

Um, buddy?

I work in engineering. I work with people who have P.Eng., and am myself working towards getting licensed. Guess what? When the client wants something that goes against our code of ethics, our job is to reply "no". When the client wants a lie, we are bound to tell the truth. That's what it means to have the ring and the stamp.

Maybe the P.Geo. societies should look into the idea of a code of ethics. Because with a code of ethics, your "profession" (look up the meaning) can indeed aspire to deliver the truth.

No "profession" gives the client a worthless report. Your "profession" should aspire to do this, at a minimum:

1. at all times provide the truth;
2. at all times make known the level of confidence in data, including the sensitivity to differences in interpretation;
3. at all times work to protect the capital of your client's shareholders;
4. at all times ensure the spotless ethical conduct of all your members, including censure or ejection of P.Geos who demonstrate incompetence or unethical behaviour;
5. through all this, contribute to the proper functioning of capital markets in order to assure the survival of your industry.

Plus the standard boring crap like ensuring obedience of the law, maximizing safety of workers, and protecting the environment.

That is what it means to have a "profession".

Your two-track system is nice, but the problem is that it's a big kludge that wouldn't be needed if only the P.Geos had ethics to begin with.

I brought this up a year ago, but I guess nobody read what I had to say.

Well, look what happened to your industry since then.

If there really is no framework that ensures the above, then the P.Geo. designation as it stands is a joke. Fix that.

Calculated Risk - comments on Q3 GDP. Reuters Data Dive - US Q3 GDP. They point out most of the 3.6% came on inventory buildup. Then again, what's supposed to happen once the interest rate curve steepens? I assume people are supposed to start buying that inventory.

Look at that! Continental, Guyana and Sulliden are now near-term gold producers!

Geez, that's what happens when you quit paying attention to junior gold stocks, eh? You completely miss out on exciting new developments.

I feel so embarrassed about giving up following these stocks. Hey, lemme check their charts right now! They must be fantastic!

Eesh. This what happens to a company that's going to be "producing" "gold" in the "near term"?

Ouch. $1.65 for GUY? Hope they don't need to raise capital.

SUE doesn't seem about to "produce" "gold" in the "near term" with a chart like this, either.

Were these the best near-term producers that Scotia could find? Or just the ones most interested in promoting themselves? Cuz you'd expect a real "near-term producer"'s chart to look like something other than a floating turd lump circling a flushed toilet's drain.

I guess Scotia must be buying these stocks hand over fist, eh? Who cares if they already have staked a position - now would be the ideal time to double down, y'know? Take profits on their previous stunning successes, and plow their money right into these "near-term producers".

The AAP believe that the promise of equality and justice that forms a part of the constitution of India and its preamble has not been fulfilled and that the independence of India has replaced enslavement to an oppressive foreign power with that to a political elite. The party claims that the common people of India remain unheard and unseen except when it suits the politicians to consider them. It wants to reverse the way that the accountability of government operates and has taken an interpretation of the Gandhian concept of swaraj as a tenet. It believes that through swaraj the government will be directly accountable to the people instead of higher officials. The swaraj model lays stress on self governance, community building and decentralisation.

I've got no disagreement with the "enslavement to the political elite" and "common people remain unheard and unseen except when it suits the politicians". That's pretty much how it is for any poor people anywhere.

Reuters - new technologies transform hunt for minerals. Someone (I think Pierre Lassonde?) was criticizing the mining industry for their failure to innovate in exploration of blind targets; here's a little article giving a basic outline of what's on the table.

Make no mistake, if this were a successful initiative, it'd transform metals exploration, and you'd be into another 10-20 year bear market for metals.

Keep in mind that the same Doomers who are telling you now that there is a housing bubble are the same Doomers who predicted foreclosure tsunamis that never arrived, and that housing prices wouldn't bottom in early 2012. On the other hand, besides yours truly who called both the top of the bubble as it happened and in summer 2011 that the bottom of the bust would occur in the early months of 2012, three other people who have a, shall we say, pretty decent record in calling the housing market - Bill McBride a/k/a Calculated Risk, Nobel Prize winner Robert Shiller, and Fed Chair nominee Janet Yellen - all agree with me that there is no new US housing bubble now.

Okay, sure, you deserve to pat yourself on the back.

Reuters Data Dive - the aging of America's things. Maybe the things have aged, not because of higher durability or lower innovation, but instead because America wasn't buying things since 2008. Maybe they will start buying things again as the economy continues to recover and a rise in interest rates forces them to shit or get off the pot? Interesting blog by the way: too bad Reuters makes it so damn difficult to RSS things.

Yahoo Finacne - Turkish gold imports up in 2013. It's not extremely important size-wise; but at 270 tons this year, over double last year's imports, it's significant enough to take note of. And considering Turkey is one of the EMs exposed to a current account crisis, maybe this reflects well on gold demand from other bad EMs?

FT beyond brics - India's current account deficit: smoke and mirrors? Good for you, Avantika; you're the first person I found (other than me) who has pointed out that India's CAD improvement on the back of restricting gold imports is fake if those gold imports simply move underground. Now ask some macro wonk to explain how to do the forensics to show where the gold smuggling effects are showing up - like in some unexpected divergence between INR and CAD, I dunno. Just don't ask Izzy: goldbugs stole her tricycle, so she's not going to be very friendly to any mention of he yellow metal.

Bespoke - red start to December. I like these guys and would like to subscribe to them again, because of commentary like this:

Investors have been selling the sectors that are up the most in 2013 over the last three days. Below is a scatter chart comparing month-to-date (December) and year-to-date performance numbers for the ten S&P 500 sectors. As you can clearly see, there is a trend of underperformance so far in December for 2013's best performing sectors, while 2013's laggards have held up relatively well to start the month. Typical profit-taking within a long-term uptrend so far. Let's see how long this continues.

Reformed Borker (Bork Bork Bork!) - forward PE per sector. He notes that banks are the most hated of the US sectors right now:

The banks are expected to be growing their earnings by 11.5% in 2014 according to the consensus, that’s faster than the S&P 500′s expected earnings growth rate of 10.8% and a better pace than what’s expected for five other sectors (Industrials, tech, Staples, Healthcare and Utilities). In addition, many of the large bank stocks haven’t even come close to recovering in share price from 2008 (the XLF is still down 45%) while they have done a ton of work repairing their balance sheets and digging deep for operational efficiencies.

In addition, the banks will be the beneficiary of a steepening yield curve if and when rates creep up in the coming year. They make a ton of money as that process happens, margins expand meaningfully.

And yet – we’re rewarding that set-up with the lowest multiple in the markets, lower than what we’re giving the utilities for god’s sake.

That’s quite a disconnect.

This is surprising to me, since regional banks (KRE) are up 100% over the last 2 years, while XLF is close behind. This compares to 60% over the same time for SPY. Is Josh calling for banks to continue outperforming the broad market?

iBankCoin - Japan chart is weak. He thinks Japan might break down from a toppy wedge, using Toyota as a forward predictor. I'd tend to assume instead that Toyota is doing a false breakdown, since they're an exporter who'll profit from a weak yen and worldwide car sales are expected to explode upward. Then again, maybe the Japan trade was too popular and it needs to fall back for a while.

Wednesday, December 4, 2013

This is one company that supposedly had professional, high-quality management and a world-class monster target.

And yet it still saddled the capital market with a >90% loss in 2 years.

Maybe part of that loss was Argentina's fault, maybe part of it was management's for failing to stay cashed up, maybe part of it was management fucking people over by putting out a poor resource days before a glory hole.

The fact remains, if this level of quality still managed to screw the capital market to the tune of -90%, why should anyone expect any capital to ever come back to this scene?

Which is why I suggest the goldbugs consider the possibility that, even if the juniors have conclusively bottomed, they may still spend the next 5 years underperforming the S&P 500. Because capital tends to have a good memory - at least when it comes to 90% losses.

Ford apparently sold the most F-series trucks since 2004, and yet it's down hard. Was this increase in sales baked into the price back in June? Or are people just selling in a pre-Fed snit again?

Small-caps are back at their short-term EMA. Any drop below this and we're threatening an actual correction instead of an overbought pullback, I guess.

Regional banking: consolidating a breakout, or pulling back on threat of... what, a Fed rate rise? That's not supposed to happen for months to come. Or is KRE supposed to go up when rates rise, since a rate rise means higher profit margin on the spread?

Or, again, is it just a pre-Fed snit selloff?

Yet the semiconductors are still breaking upwards.

And $VIX as of 9:59AM is still over 2SD up. Why are people in such a hurry to buy downside protection?

Bespoke - European stocks suffer a setback. A bunch of 50DMAs got broken, which is sad because things looked about to break to the upside. I guess Americans have spent the past couple days pulling their money out of the Europe play too. So where is the money going?

Reuters - Indian gold bullion smuggling outstrips narcotics. Nobody knows fuck all about Indian gold demand trends unless they know Indian gold smuggling in detail. Remember this next time some yellow journalist files another "Indian gold demand collapse" article at the behest of Goldman Sachs and JP Morgan.

We have become aware that the United States Securities and Exchange Commission has issued a temporary suspension for the trading of our company's securities, citing the adequacy and accuracy of information provided by ourselves and others in regards to our assets, operations and financial conditions as the reason for our trading suspension. While we cannot comment on the information provided by third parties in regards to our Company, we are of the view that our disclosure documents and press releases accurately describe our assets, operations and proposed activities.

This makes it sound like some "independent third party" has started using NVGC as a pump-and-dump. The Liberty Silver scam involved someone involved in the company giving non-compliant information to newsletter writers, then having the stock bid up based on those third-party falsehoods while the company stayed relatively in-the-clear; maybe the same was going on with Nevada Gold, and the SEC decided to put a stop to it?

Would my readers from the SEC wish to leave an anonymous comment below this post?

Junior Gold Miner Seeker - Rick Rule on hubris. You can read most of what he has to say here, instead of listening to the interview on Stansberry Radio.

It's now pretty clear that the guys at Mount Kellett, the people who bought 19.9% of BAJ at prices around a $1 (best guess) average and then went on for NR after NR about their belief in Boleo's world class potential etc etc, know fuck all about mining. The moral here is that just because you have $60m to throw at the market it doesn't make you smart.

I'd add that this also applies to Rick Rule, Ned Goodman, Sheldon Inwentash, KORES, Teck, and pretty much every single newsletter writer and blogger. Even if a guy made fantastic money in the resource bubble of 2008-2010, it doesn't mean that they're going to make a cent now that the playing field has changed.

Assume time travel is invented in the 28th century. Well, of course no time travellers went to Stephen Hawking's 2009 birthday party! Time travel hadn't yet been invented in 2009! Therefore, in 2009, there is not one person in the world who has made the decision to travel back in time, so Hawking's birthday party is a bust.

Perhaps after time travel has been invented, we'll all of a sudden remember stories of how time travellers went to Stephen Hawking's birthday party in 2009. Suddenly we'll find an ancient photograph of Hawking's party, with him hanging out with John Titor, Captain Janeway, and Tom Baker.

#2: Y u so want time travellers?

I wouldn't invite time travellers to meet me if I were you. You never know: maybe your grandson becomes the next MegaHitler, so someone decides to go back in time and assassinate you to save the lives of billions. Maybe someone invents a superbomb capable of destroying the galaxy, and it's all because of some stupid equation that only Hawking could possibly have solved.

So if I were you, buddy, I'd just lay low. Quit being a fucking temporal heatscore.

#3: dude, ur teh lamez

If I were a time traveller, why the hell would I want to go back in time to visit Stephen Hawking? He's just some math dude in a wheelchair.

If I were going back in time, I'd want to go to Lindsay Lohan's Sweet 16 party. She was cute back then, and we now know she's crazy enough that I might get lucky.

In her pooper.

Summary

Sorry, Prof. Hawking, but there are all sorts of reasons time travellers may haven't have been wented to your birthday party. Some of them have to do with the weird time paradoxy stuff, but others simply reflect badly on you.

Bespoke - overbought pullback. While $VIX is rising, there seems to be no freakiness in the term structure as of yet, so I guess people are just going to dump for a few days in anticipation of blah blah Federal Reserve.

Mineweb - gold mining executives come under fire. An article about various people openly criticizing the people who run gold companies. Surprisingly no mention of the mine engineers, who have no clue how to build a mine on time and under budget, or the P.Geos who have no clue how to properly interpret drill data. But there is this gem:

According to Bachmann, the fellowship among, shareholders, labour, government and executives within mining generally has broken down.

To prove this point, and using the gold sector as a proxy, Bachmann showed that over the last 10 years, while shareholders have seen a 158% return, government’s over the same period have seen a 1,488% increase in their share, while the direct packages of executives have risen 1,032% over the same ten year period.

“There is a huge disconnect between the shareholders and the executives,” Bachmann said, “there is too much fat cat behavior, too much free-riding.”

I'm one of "those people" who finds it insulting to be asked to kiss up to someone, so I find the present situation of open hostility to mining execs to be frankly hilarious. I'm sure everyone will be sucking industry dicks again in just a couple years.

Now, I seem to subconsciously do grade subinterval calculations in my head, because this rang an alarm bell. So I went off to the corebox drill interval calculator and plugged these numbers in and got:

The residual here is 44.45m @ 11.18g/t which is better. Though having took first-year physics I ask whether that 0.50m high-grade interval is exactly 0.50m, or if they simply round off as a matter of custom.

After all, if the process rounds everything off to the nearest half-metre, then a 0.545m interval at 7700g/t means a residual of 44.405m @ 3.392g/t, and again the residual is waste.

Speaking of which, do P.Geos go to university? If so, do they take first-year physics? At all? Are they required to pass it? Cos when I went to U, we had it beaten into our skulls that no number can ever be reported unless you include the complete margin of error. Seriously. That was the only reason we did those stupid 3-hour labs every week: to learn that there's no such thing as exact measurement of anything, and indeed that reporting numbers as if they were exact is unethical and/or incompetent.

So in every situation, you have to calculate error, and report the maximum and minimum possible values.

I mean, simply splitting a core, mashing, and pulling a sample should introduce error. Why do these numbers come without error estimations? Any professional geologists want to explain why their profession gets a pass from the proper and conscientious reporting of data? Error seems to be a major caveat in high-grade narrow-vein data.

Are these larger intervals (8m, 13.5m, 20.5m, 44.95m) being reported simply because that is the minimum size of tunnel or vault that will need to be constructed to mine the vein at that location?

Because hey, if you're trying to tell me that mining that 4780g/t interval will require constructing a 3m wide by 4.5m high tunnel to follow that vein, then I understand: you're saying the total bulk around that vein will still come in at 179g/t, so it'll be profitable.

But this is supposed to be an open pit, no?

Anyway, if the P.Geo associations, or maybe the BCSC and OSC, would like to initiate a process of refining the NI 43-101 to force companies to include error calculations in drill results, that would be very nice of them. Because it's first-year science. And it would mean less misleading data. This is a perfect example.

Here's some stuff I happened across that you might like to take a look at:

Reformed Borker (Bork Bork Bork!) - Wall Street still hates stocks. his is a must-read for anyone out there who has any interest in using sentiment indicators in a contrarian manner:

[The Sell-Side Indicator has] been an incredibly good contrarian indicator. While it does not catch every bottom or top, the indicator has a higher r-squared (28%) than just about any other you can think of in terms of predicting subsequent 12-month returns for the S&P 500. Anecdotally, this pessimism-as-base-case on Wall Street has been one of the best tells to stay long (here’s me in the summer of 2012 highlighting it).

So where are we on the sentiment scale relative to the past? Subramanian notes that, while the Sell Side Sentiment index now sits at a 19-month high (up 12 of the last 15 months), we are still in “Buy” territory with stocks still way too forsaken and close to their 2009 sentiment lows. The strategist says “Historically, when our indicator has been this low or lower, total returns over the subsequent 12 months have been positive more than 95% of the time, with median 12-month returns of +27%.” The indicator’s current level would indicate an expected return for the S&P 500 of 18% in the next 12 months, based on the report.

There is of course an obvious caveat that backtesting means nothing.

However, the sell-side indicator's correlation factor is way higher than any other bullshit sentiment factor. And maybe for good reason: markets don't top til everyone's done buying, and this indicator vaguely reflects how many people are done buying.

Ask your local TA/sentiment "analyst", by the way, if he ever took a proper stats course. I'd think it has to be mandatory, but you never know.

Junior Gold Miner Seeker - long term chart of the Venture. Apparently stimulated by an Eric Coffin presentation, which he links to. The chart gives you an idea of how long you might have to wait til the next party.

Which does look rather interesting, since it means there are a heck of a lot more gold contracts out there than there are ounces of gold to cover them. I don't want to turn into a Zerohedger here, but it truly does look rather interesting; especially if the open interest is mostly short, no?

While the [P]ope’s comments are excellent cause for reflection, they should not obscure the reality that innovative free enterprise is the greatest wealth generator ever discovered and the economic system most supportive of human freedom and flourishing.

Generating wealth means nothing if that wealth is all going to the ultra-rich, who hide their money in untaxable offshore accounts with the help of agents at JP Morgan and the rest of the banking system to ensure that they never have to contribute to improving the well-being of those less fortunate.

And "supportive of human freedom"? Aside from crushing the poor, how else is JP Morgan and the kleptocratic elite supporting human freedom? Are you campaigning against the constant erosion of rights by States who are attempting to maximize surveillance and control of their populations?

Poverty is not a modern phenomenon.

Sure, neither is evil. But saying "poverty is okay because a discredited economic principle will take care of it, eventually, maybe, we hope" is a modern phenomenon.

Those hurt by the recession will be restored as the developed economies continue to recover.

Which is cold comfort when you've spent five years unemployed with no money coming in. You're basically saying "well, as long as the poor can survive the long interim, eventually they might see things get better." How did your rich buddies at JP Morgan spend the past five years helping the millions of people that your own crass speculation put out of work?

Technological innovation often is portrayed as a destroyer of jobs rather than a creator of new economic frontiers.

You're being quite disingenuous here: you obviously wrote this sentence in an attempt to portray the Pope as a Luddite. He's not a Luddite, he's a disciple of Christ. So your following paragraphs are addressing a straw man.

The widening distribution of income in the US and other developed economies is attracting considerable attention. It would be unsettling, and destabilizing, if the global “economic pie” were static and one group were benefiting at the expense of others. Instead, what likely is driving the distribution of income is the wealth of opportunity that is associated with an expanding global “economic pie” and that because it is occurring at an eye-popping pace has uneven benefits.

One group is indeed benefiting at the expense of others - very literally in the US, where your criminality managed to screw the US out of several trillion dollars while destroying people's wealth and tossing them out on the street. Workers still haven't seen a real increase in income in decades, your lackeys in the Republican Party are destroying workers' ability to form unions, and you're constantly clamouring for the social safety net to be dismantled in the name of Ayn Rand.

I'm sure a Jesuit isn't allowed to call you a Fascist cunt, James Glassman, but he'd probably allow me to do it for him.

So, James Glassman, you are indeed a Fascist cunt. And Jesus hates you.

Sunday, December 1, 2013

Calculated Risk - inflation rate is key to a December taper decision. He points out the market has already discounted the possibility of a December taper. I wonder if the language in the Fed announcement, even if in agreement with this estimation, could still cause the market to barf for a couple days?

Calculated Risk - EZ unemployment falls slightly. So you're at the bottom of the cycle with no sign of new crisis, so at some point it becomes a good idea to pour money into European equities. Then again, I guess that's already been going on this year.

Mining.com - Indian families could recycle 400 tons of gold this year. Which would be doom for the gold price. Of course, this shocking assertion about the massive change in gold recycling originates from a report in an Indian news website about the assertion of a guy who owns a gold shop in a bazaar. So I'm sorry, but I'll believe this recycling story when it's confirmed by GFMS and the WGC. Message to Frik Els: stop using crappy sources for your news reports.

WaPo - SEC ups efforts to combat manipulations of micro-cap stocks. Via IKN. Yeah Otto, and that's nice and all. But the problem is, at least when it comes to gold and silver pumps, that junior mining scams are usually run by people associated with the Republican Party. The frauds usually use the mailing lists from the Tea Party or the various "Family"-related right-wing organizations, and they combine that with a goldbug narrative of imminent societal collapse. So I don't think it's likely that any SEC enforcement will actually hit the important and powerful.